THE BEST PLAN FOR FILLING THE FISCAL GAP?
JAY HAMMOND'S COMMENTS ON RAY METCALFE'S FISCAL GAP SOLUTION

By Jay Hammond
Forwarded by Ray Metcalfe
Port Alsworth, AK
Oct. 18, 2002

While governor I probably made terrible mistakes in failing to veto two changes in the way we taxed oil. One was called "ELF" for "Economic Limit Factor"; the other abandoned so-called "separate accounting". Though at the time I'd been assured neither would significantly reduce the state's share of our oil wealth, subsequent changes in federal law, oil pricing and other factors perhaps have cost Alaskans billions of dollars. When this first became evident during the early eighties, both taxing methods should have been repealed. Instead, too many politicians, deemed to be in the hind pocket of "Big Oil", failed to even consider the matter. One exceptional legislator, Sen. Halford, disinclined to dance cheek to cheek with Big Oil, tells me failure to eliminate ELF currently costs us $100,000,000 a year and could cost us $500,000,000 five years from now! Loss of separate accounting may have cost us even more!

Many, of course, will argue that had we not adopted those two measures we would have discouraged oil development which later took place. Who knows? Yet even some in the oil patch tell me they expect and could live with elimination of ELF. They simply don't want to be the first and only ones required to help fill the budget gap. Certainly this issue should at least be explored before using sales taxes, income taxes or dividend dollars for fill. But unless voters demand it, you can bet it won't even be touched with a thirty foot pole.

One politician clearly more burr in their britches than beholding to Oil is former legislator and Moderate Republican candidate Ray Metcalfe. Recently he challenged me to meet my commitment to support whatever plan could best fill the fiscal gap. I hereby acknowledge that certainly his plan would if his data and assumptions are correct. Are they? I simply don't know. Lamentably, neither do you. That's a shame. If he's correct, the fiscal gap could be filled without budget cuts, taxing Alaskans, or loss of dividends

I believe Metcalfe's plan warrants far more publicity than the short shrift accorded it by the media. Don't simply brush Metcalfe off. as a light weight gad fly who doesn't know what he's talking about. He obviously has done extensive research and assembled a wealth of data comparing Alaska's tax policies to other oil rich entities When it comes to slicing the pie, he makes a strong case that Alaskans, by contrast to them, may have settled mostly for crust, while Big Oil gets most the cream.

I believe the media owe Alaskans the opportunity to at least hear Metcalf's plan out. To date it has provided nothing but cursory synopses. If granted more exposure, Metcalfe will have to make his own case. The best I can tell you is that it provides an intriguing amalgamation of the Cremo Plan, the Permanent Fund Endowment plan and the Parachute plan.

It has been said: "Never underestimate voter's intelligence, nor over estimate their knowledge". The media should be supplying that knowledge. Once it has done so, unless big holes can be punched in Metcalf's conclusions, his plan should be seriously considered by the legislature.

I can think of no one better able to deliver those potential punches than ex-Golden Glove champ, Walter Hickel. Certainly he has the background, knowledge, capability and dedication to Alaska's future required to make a credible assessment. Moreover, no one has ever charged Wally with being in anyone's hind pocket. I, by contrast, am far less familiar with high finance and big business, thus lacking credibility among those who believe I have some secret "green" agenda. Were Governor Hickel to conclude Metcalf is correct, I'd be pleased to join him in endorsing the plan.

Unfortunately, while Metcalf's plan may be the best for most Alaskans, it lacks feasibility. Unless the legislature does an about face and is willing to at least nibble around the edges of ELF, which Halford believes they should, it will remain far too timid to bite the hand of Big Oil and reach for a larger slice of that pie. That's too bad, for absent sufficient legislative courage to take other actions, you can bet the fat cats will likely succeed in dumping your dividends into the liter box first.